Abraham et al v. Entrepreneur Media, Inc.

Filing 10

MEMORANDUM AND DECISION - For the reasons set forth herein, Defendant's 4 motion to dismiss is GRANTED. Plaintiffs' Complaint is DISMISSED WITH PREJUDICE. The Clerk of Court is ordered to mark this matter as closed. So Ordered by Judge Joanna Seybert on 11/17/09. C/ECF (Valle, Christine)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK ------------------------------------X ILAN ABRAHAM, et al., -againstPlaintiffs, MEMORANDUM AND DECISION 09-CV-2096 (JS)(MLO)

ENTREPRENEUR MEDIA, INC.,

Defendant. ------------------------------------X APPEARANCES: For Plaintiffs: Eliot F. Bloom, Esq. 114 Old Country Road, Suite 308 Mineola, NY 11501 For Defendant: Richard Eskew, Esq. Steven B. Pokotilow, Esq. Stroock & Stroock & Lavan LLP 180 Maiden Lane New York, NY 10038

SEYBERT, District Judge: Defendant Entrepreneur Media, Inc. ("Entrepreneur") has moved to dismiss Plaintiffs' Complaint. For the foregoing reasons, that motion is GRANTED. BACKGROUND Plaintiffs are a group of individual investors who, prior to January 2009, had invested in Agape World, Inc. ("Agape"). (Compl. ¶ 1). Entrepreneur is an online and print business (Compl. ¶ 4).

publication that covers small businesses.

In May 2008, Entrepreneur published its annual "Hot 100" list of fast-growing American companies. (Compl. ¶ 4). This list

included Agape. (Compl. ¶ 5). In January 2009, Agape was publicly revealed to be a Ponzi scheme. (Compl. ¶ 11). As a result,

Plaintiffs lost a significant portion of their investment in Agape.

(Compl. ¶ 12). Plaintiffs allege that Entrepreneur's inclusion of Agape in its "Hot 100" list was grossly negligent. According to

Plaintiffs, Entrepreneur included Agape on its "Hot 100" list solely based on positive financial information that Agape conveyed. (Compl. ¶¶ 5-6). Plaintiffs claim that Entrepreneur made no effort to verify this information, never visited Agape's headquarters, never met with Agape's principals, and never reviewed Agape's books and records. (Compl. ¶ 6). Plaintiffs proffer that, if

Entrepreneur acted "with a minimum of due diligence" it would have discovered that Agape supplied it with false information, and would have concluded that Agape was not eligible for the "Hot 100" list. (Compl. ¶ 7). Plaintiffs thus assert a single cause of action:

gross negligence. DISCUSSION I. Standard of Review on Motions to Dismiss In deciding motions to dismiss brought under Fed. R. Civ. P. 12(b)(6), the Court applies a "plausibility standard," which is guided by "[t]wo working principles," Ashcroft v. Iqbal, __ U.S.

__, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009); Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009). First, although the Court

must accept all of a complaint's allegations as true, this "tenet" is "inapplicable to legal conclusions"; thus, "[t]hreadbare

recitals of the elements of a cause of action, supported by mere 2

conclusory statements, do not suffice." (quoting Ashcroft). Second, only

Harris, 572 F.3d at 72 that state a

complaints

"plausible claim for relief" survive a motion to dismiss, and determining whether a complaint does so is "a context-specific task that requires the reviewing court Id. to draw on its judicial

experience and common sense." II.

Plaintiffs Fail to State a Claim Entrepreneur argues that Plaintiffs fail to state a

claim, because, under New York law, a magazine publisher owes no duty of care to subscribers or readers, and thus cannot be found liable for negligently publishing non-defamatory misstatements. Entrepreneur is unquestionably correct.1 Indeed, New York courts

See, e.g., First Equity Corp. of Florida v. Standard & Poor's Corp., 869 F.2d 175, 179 (2d Cir. 1989) (investment newsletter owed no duty of care to subscribers and thus lacked liability for negligent misrepresentations concerning a security); Stoianoff v. Gahona, 248 A.D.2d 525, 526-527, 670 N.Y.S.2d 204, 205 (2d Dep't 1998); Lacoff v. Buena Vista Pub., Inc., 705 N.Y.S.2d 183, 192 (N.Y. Sup. Ct., N.Y. County 2000) ("Plaintiffs' allegations fail to state a claim, because defendants have no duty to investigate the accuracy of the contents of the book they published."); Daniel v. Dow Jones & Co., Inc., 520 N.Y.S.2d 334, 335 (N.Y.C. Civ. Ct. 1987); see also McMillan v. Togus Regional Office, Dept. of Veterans Affairs, 120 Fed. Appx. 849, 852 (2d Cir. 2005) ("In the absence of fraud or a special relationship . . . publishers owe no duty of due care to readers or to the public at large. No cause of action therefore arises (absent fraud) even if published information is false and the falsity results in injury to the plaintiff when the plaintiff, like McMillan, is merely a reader or member of the public."). 3

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have uniformly held this way for 88 years.2 of numerous other jurisdictions.3

And so have the courts

In opposition, Plaintiffs present no response at all. Plaintiffs do not address Entrepreneur's argument that New York law bars their cause of action. Indeed, Plaintiffs do not cite a

single case concerning either New York law or the common law of negligence. Instead, Plaintiffs: (1) complain that they have "not

been afforded the opportunity to conduct discovery"; (2) contend that Entrepreneur's motion is actually one for summary judgment because it concerns "questions of fact"; and (3) seek a

"continuance" so that they may take discovery. Plaintiffs' argument is frivolous. Plaintiffs are not

entitled to discovery because, even if everything they pled is true, New York law simply does not permit their cause of action. Indeed, the very point of a motion to dismiss is to shield defendants from having to proceed with discovery when a complaint's allegations fail to state a legally cognizable claim. Similarly, Plaintiffs' contention that Entrepreneur has actually moved for summary judgment displays a complete ignorance

See, e.g., Jaillet v. Cashman, 189 N.Y.S. 743, 744 (N.Y. Sup. Ct., N.Y. County 1921). Winter v. G.P. Putnam's Sons, 938 F.2d 1033, 1036 -1037 (9th Cir. 1991) (California law); Gutter v. Dow Jones, Inc., 490 N.E.2d 898, 902 (Ohio 1986) (Ohio law); Gorran v. Atkins Nutritionals, Inc., 464 F. Supp. 2d 315, 325-26 (S.D.N.Y. 2006) (applying Florida law). 4
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of federal practice.

Plaintiffs appear to derive this argument

from Entrepreneur's decision to include the actual text from the Agape "Hot 100" list entry within its motion to dismiss papers. But, even on a motion to dismiss, Entrepreneur was wholly within its rights to do so. Plaintiffs' allegations depend upon the

allegedly false information contained in the Agape "Hot 100" list entry. Thus, Plaintiffs have incorporated this entry into their And, consequently, the Court is entitled Samuels

Complaint by reference.

to take judicial notice of it even on a motion to dismiss.

v. Air Transport Local 504, 992 F.2d 12, 15 (2d Cir. 1993).4 III. Rule 11 Under Fed. R. Civ. P. 11(b)(2), an attorney who files pleadings in federal court is presumed to certify that the

pleading's "claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law." Here, as discussed above, Plaintiffs' claims lack any That being said, the issuance of sanctions And, in its discretion, the Court But Plaintiffs' counsel is

basis in existing law.

under Rule 11 is discretionary.

elects not to impose sanctions here.

warned that, should he file another frivolous pleading in this

Because the Court finds that the Complaint fails to state a claim, the Court does not reach Defendant's argument that the First Amendment protected its publication of information about Agape. 5

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Court again, the Court may exercise its discretion differently. CONCLUSION For the foregoing reasons, Defendant's motion to dismiss is GRANTED. Plaintiffs' Complaint is DISMISSED WITH PREJUDICE.

The Clerk of the Court is ordered to mark this matter as closed.

SO ORDERED. /s/ JOANNA SEYBERT Joanna Seybert, U.S.D.J. Dated: Central Islip, New York November 17 , 2009

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